What business structure should I choose in Malaysia: sole proprietorship, partnership, LLP or Sdn Bhd?
Pick based on liability, who owns it and how credible you need to look. A sole proprietorship or partnership is cheapest but the owners are personally liable; an LLP or a Sdn Bhd gives a separate legal entity. A Sdn Bhd is the usual choice once you hire staff, sign larger contracts or bring in investors.
Malaysia has four common structures for a small business:
- Sole proprietorship: one owner, registered with SSM under the Registration of Businesses Act 1956. No separation between you and the business.
- Partnership: two or more people under the same Act. Each partner is personally liable. The Companies Act 2016 (s.13) bars a business partnership of more than 20 persons unless it is incorporated.
- Limited liability partnership (LLP): registered under the LLP Act 2012. It is a separate legal entity, usually used by professional or small partner-run businesses.
- Private company (Sdn Bhd): a company limited by shares with one or more shareholders and at least one director.
- Public company (Bhd): can raise money from the public and has stricter rules.
Questions to ask yourself:
- Can I afford to lose personal assets if the business is sued or fails?
- Will customers, banks or tenders expect a company?
- Do I want investors or employees to hold shares?
- Am I ready for the yearly filing duties a company carries?
If the answers lean towards "protect myself" and "look credible", a Sdn Bhd usually fits. For tax differences between structures, ask a tax adviser.
Legal basis
- Companies Act 2016, s.10
- Companies Act 2016, s.11
- Companies Act 2016, s.13
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What is the difference between a sole proprietorship and a Sdn Bhd in Malaysia?A sole proprietorship is not a separate legal person, so you are personally liable for all business debts. A Sdn Bhd is its own legal person and shareholders are generally liable only for unpaid share capital. A Sdn Bhd costs more to set up and carries more yearly filing duties.
- What is an LLP in Malaysia and how is it different from a Sdn Bhd?A limited liability partnership (LLP) is a body corporate registered under the LLP Act 2012. It needs at least two partners (a shortfall is allowed for six months) and a compliance officer who is a Malaysian citizen or permanent resident living in Malaysia. It runs on a partnership agreement, not a board. A Sdn Bhd has directors, shares and heavier governance under the Companies Act 2016.
- Can one person be the only director and shareholder of a Sdn Bhd?Yes. A company needs at least one member and one director, and one person can be both. A private company must have at least one director who ordinarily lives in Malaysia. You still need a licensed company secretary, and you cannot act as both director and secretary where the law needs both.
- What is the minimum paid-up capital for a Sdn Bhd in Malaysia?The Companies Act 2016 sets no minimum amount; a company needs at least one share. Shares no longer have a par value. Many Sdn Bhds start with RM1 to RM1,000, but regulators, banks and immigration can expect more depending on your activity or foreign ownership.
- Is a company constitution compulsory for a Sdn Bhd in Malaysia?No. Under the Companies Act 2016 a company may choose to adopt a constitution by special resolution. Without one, the Act's default rules apply. If you do adopt one, you must lodge it with SSM within 30 days. A company limited by guarantee must have a constitution.